Wells Fargo, the largest depository mortgage lender in America, issued pink slips to employees in its home lending business on Tuesday following its decision to exit the correspondent channel.
“I can’t provide any specifics but we announced in January strategic plans to create a more focused Home Lending business,” Tom Goyda, senior vice president of consumer lending communications at Wells Fargo, said in an e-mailed response.
The cuts were part of the company’s efforts to simplify the home lending business that it has worked on over the past three years — and were also in response to significant decreases in mortgage volume in the broader market environment, Goyda added.
In January, the top depository mortgage lender announced that it would slim down its home lending business by exiting correspondent lending and reducing its mortgage servicing portfolio.
While the correspondent channel has the advantage of relying on the strength of small lenders, the correspondent business has lower margins due to payments made to a network of smaller lenders. It also brings a “reputational risk” when financing large amounts of loans originated from other firms.
Wells Fargo’s correspondent lending business was already in a freefall. It originated $37 billion in the correspondent lending space in the first nine months of 2022, down 27% compared to the same period in 2021, according to data from Inside Mortgage Finance data, ranking as the third-largest player in the correspondent space.
The bank’s mortgage servicing rights declined by 5% to $9.3 billion in the fourth quarter of 2022, dropping from the third quarter $9.8 billion, according to its latest earnings. The net servicing income rose 16% quarter-over-quarter to $94 million but was down 25% year-over-year.
“We have communicated openly and honestly with impacted employees and provided opportunities for severance, career assistance, and other services to assist them,” Goyda said.
The bank plans to retain as many employees as possible and has had success identifying other opportunities and transferring the affected employees into other roles within Wells Fargo, according to the company.
Wells Fargo cut 140 jobs in its Springfield, Illinois mortgage office last month in addition to eliminating hundreds of positions in December.